Luxury fashion seeks new ways to leverage web3

4 mins read

In a year marked by turbulence for the cryptocurrency and Web3 sectors, a recent report from dappGambl, a leading crypto analysis company, reveals a disheartening statistic: a staggering 95% of all Non-Fungible Tokens (NFTs) have effectively lost their value. In a market comprising 73,257 NFT collections, a disconcerting 69,795 were found to be worth precisely 0 Ethereum. This grim revelation comes amid the backdrop of the ongoing liquidation of assets from the defunct cryptocurrency exchange FTX, casting a long shadow over the values of cryptocurrencies like Bitcoin. Notably, even renowned brands such as Nike have witnessed the decline of their recent NFT offerings compared to their earlier collections.

Amid this turmoil, the luxury fashion industry stands as one of the few sectors continuing to champion the allure of scarce digital assets. Yet, an intriguing shift is underway within this realm, where NFTs are no longer marketed in isolation. Instead, luxury brands are increasingly coupling them with tangible products and exclusive experiences. Noteworthy instances include Louis Vuitton’s collaboration with Pharrell Williams, resulting in the creation of $39,000 trunks that blend both physical and digital components. Similarly, Prada recently employed an NFT as an exclusive pass to its Milan Fashion Week showcase.

This strategic shift is by design, as explained by Ian Rogers, former executive at Apple and LVMH, who currently serves as the Chief Experience Officer for Ledger, a cryptocurrency wallet company. With a background in managing digital assets and luxury fashion, Rogers highlights the rationale behind this trend. He observes that luxury brands, like LVMH and Dior, have been particularly successful in navigating the crypto tumult because of their proximity to creativity and agility in identifying trends. Much like luxury watches, which are valued more for their investment potential than their time-telling function, NFTs have found resonance with this same desire for enduring value.

Both Rogers and Pascal Gauthier, CEO of Ledger, see the recent upheaval in crypto exchanges and the plummeting value of NFTs as indicative of a maturing phase in the Web3 space. For them, the initial hype surrounding Web3 is dissipating, allowing for practical use cases to take centre stage.

“The fluff has been burned away,” notes Rogers. “What LVMH and other members of the Aura Blockchain Consortium are accomplishing with NFTs transcends the headline-grabbing ‘Bored Ape goes to the moon’ narratives; it’s the subtle refinement of business processes underneath the surface.”

Gauthier underscores this point by citing Starbucks’ adoption of a blockchain-based loyalty program last year. This Web3 initiative, while hidden from the user, streamlines customer relationship management and is not limited to luxury brands.

The human toll of NFTs’ year-long descent from their euphoric highs has been substantial, with numerous stories emerging of individuals losing their life savings through poor NFT investments, whether due to fraud, hacking, or volatile asset values.

To address these concerns, both the United Kingdom and the United States are enacting regulatory measures for the industry. The U.K. Travel Rule now mandates that crypto exchanges collect and share transaction information, while in the U.S., a bipartisan bill passed in July lays the groundwork for cryptocurrency regulation.

Gauthier emphasises that the initial wave of NFT projects was fraught with excitement and speculation, often luring investors into financially perilous situations. He states, “In a bull market, even seasoned investors can forget their principles, driven by the allure of quick riches. Regulation, particularly for centralised entities, is a logical step forward.”

As the cryptocurrency and Web3 sectors navigate this turbulent period, stakeholders are increasingly embracing a more pragmatic and regulatory approach, hoping to build a stable foundation for the industry’s future growth.